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Harnessing AI in Banking: Enhancing FX Transactions and Strengthening Fraud Prevention

  • Article

In today’s digital transformation landscape, HSBC is leading the adoption of innovative technologies to deliver exceptional client services while maintaining operational resilience. Artificial Intelligence (“AI”) is one of the most impactful technologies driving this change. By utilizing AI in banking, HSBC can anticipate account behaviors and optimize foreign exchange (FX) transactions within the bank’s correspondent banking solutions. AI-powered systems are continuously monitoring transactions to detect and prevent potential payment fraud before it occurs.

This article explores how HSBC is leveraging AI to revolutionize and automate FX conversions of cross boarder wires using AutoConvert FX with AI™ within its correspondent banking offerings. Correspondent bank clients include financial institutions (FIs) that provide services to other FIs in another country.

What is AutoConvert FX with AI™ and how does it work?

HSBC’s AutoConvert FX with AI™ offers predictive capabilities that are reshaping how correspondent bank clients understand relevant transacting accounts and payment activities. It automates FX conversions of cross-border wires wherever possible, by leveraging HSBC’s global transaction data, proprietary rules, and artificial intelligence models. By enabling AI, an added layer of intelligence is added to the payment screening, helping to assess the ultimate beneficiary accounts’ currency. This will enable payment conversion of your USD wires into the beneficiary’s preferred account currency.

Benefits of AutoConvert FX with AI™

AutoConvert FX with AI™ has many benefits including:

  • Allows the beneficiary to receive payments in the correct currency with a competitive market rate FX margin.
  • Setup is easy as we leverage the clients existing USD account.
  • There is potential for rebates based on the FX margin and revenue share opportunity.
  • Payment conversion capabilities exist for 18 currencies.

Improving Predictive Analytics for Account Information with AI

  1. Predictive Account Information: AI can predict the beneficiary account’s information by leveraging the available ad-hoc transaction data to better understand if the account is in a particular currency, or multiple currencies.
  2. Improve Risk Management: AI models can assess past transaction activities accurately by analyzing a broader range of variables versus traditional methods. This reduces the likelihood of inaccurate conversions, improves Straight-through-Processing, and helps banks offer more competitive services to their clients.
  3. Enhance Operational Efficiency: Predictive analytics can forecast account activity, enabling banks to optimize their resources, reduce operational costs, and improve service delivery.

Enhancing FX Trading with AI

Foreign exchange (FX) is a dynamic and complex aspect of banking, where accuracy and speed are critical. AI is revolutionizing FX trading and transactions in several ways:

  1. Automated Trading: AI-powered algorithms can execute trades, with the predictive account information, ensuring the beneficiary receives the most appropriate currency based on available information. This automation also reduces the risk of human error and enhances the speed of the transaction.
  2. Market Analysis and Forecasting: AI can process vast amounts of transaction data in real-time, identifying trends and anomalies that human analysts might miss. This leads to more accurate currency predictions and better decision-making for both the bank and its clients.
  3. Customized FX Solutions: By analyzing client transaction history, and existing rule-based recommendation, AI can suggest a tailored and enhanced FX conversion decision, helping clients manage currency risks more effectively.

Strengthening Fraud Prevention with AI

Fraud remains a significant concern for both banks and their customers. AI is a powerful tool in combating fraud by identifying suspicious activities and preventing fraudulent transactions before they occur. Here’s how:

  1. Real-Time Fraud Detection: AI systems can monitor transactions in real-time, flagging any activity that deviates from a customer’s typical behavior. This enables banks to quickly investigate and stop potential fraud, minimizing losses.
  2. Adaptive Learning: AI models can continuously learn from new data, improving their ability to detect emerging fraud patterns. This ensures that the bank’s fraud prevention measures remain effective against increasingly sophisticated threats.
  3. Enhanced Security Protocols: AI can help develop more secure authentication methods, such as biometric verification or behavioral biometrics, making it harder for fraudsters to gain unauthorized access to accounts.

Enabling AI for AutoConvert FX

HSBC can now leverage our tenured rules-based solution, which allows for broader coverage, recommendations based on a select set of parameters and reactive enhancements based on mis conversions and combine it with AI to increase the success and efficiency of AutoConvert FX. This allows for a great opportunity with the introduction of AI. By adding an additional layer of intelligence to the payment, we anticipate conversion rates to increase – especially in areas where we have less payment history to rely on.

We understand the complexities of international transactions and the importance of cost efficiency for our clients. FX Auto Convert leverages HSBC's global footprint to deliver a seamless and transparent experience, significantly reducing intermediary fees and providing competitive rates. Our goal is to make international payments as straightforward and cost-effective as possible,

Tom Halpin | North American Head of Global Payments Solutions HSBC

Conclusion

The integration of AI into banking processes is not just a trend but a necessity in today’s fast-paced financial environment. By leveraging AI with our AutoConvert FX product, combined with our position as top 3 in global SWIFT volume, which allows us to leverage beneficiary data, we can better predict account behaviors, enhance FX transactions, and combat fraud. In turn, HSBC can provide more personalized, efficient, and secure services to their clients. As AI technology continues to evolve, its role in transforming the banking industry will only grow, helping institutions stay ahead of the curve and meet the ever-changing needs of their customers.

For clients and stakeholders, the adoption of AI at HSBC represents a commitment to innovation, security, and superior service—a combination that is essential for success in the modern financial landscape.

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